Warren Buffett on how the average person can invest.

By Abi Tyas Tunggal 4 March 2018 7 min read

Warren “The Oracle of Omaha” Buffett is touted as the world’s greatest investor, so I thought it’d be helpful if we searched around the web for his best interviews.

Below are two videos with Buffett that I think are worth watching. I’ve also transcribed the interviews for you in case you prefer text. The transcripts are slightly edited, mainly to remove verbal ticks.

Warren Buffett: How Average People Can Invest

December 16, 2016

Transcript

BRIAN: Hi I'm Brian Ziemonboker, I'm a second year student.

Mr Buffett, it's great to see you again, I was on the trip to Omaha last month.

Thank you for hosting us. My question is:

How would you recommended an individual investor who follows the Graham and Dodd philosophy to allocate their capital today?

WARREN BUFFETT: Well, it depends whether they're going to be an active investor.

Graham distinguished between the defensive and the enterprising investor.

If you're going to spend a lot of time on investment, I just advise looking at as many things as possible and you will find some bargains and when you find them you have to act.

It doesn't...it hasn't changed at all since I was here in 1950-51 and it won't change for the rest of my life.

So you just...you start turning pages. When I got out of school, I turned every page in Moody's ten thousand some pages twice, looking for companies and you have to find them yourself. The world isn’t going to tell you about great deals, you have to find them yourself and that takes a fair amount of time.

So if you're not going to do that, if you're just going to be a passive investor, then I advise an index fund bought consistently over a long period of time.

The one thing I will tell you is that the worst investment that you can have is cash.

Everybody is all about cash being king and all that sort of thing but...most of you don't look like you're overburdened with cash anyway. So… hahaha.

Cash is going to become worth less over time, but good businesses are going to become worth more over time, and you don't want to pay too much for them. So you have to have some discipline about what you pay. But the thing to do is find a good business and stick with it.

ANONYMOUS AUDIENCE MEMBER: Does that mean you think we are through the roughest times? You always kept a cash hoard around, too.

WARREN BUFFETT: Well, well, we always keep enough cash around so I feel very comfortable and don't worry about sleeping at night.

But it's not because I like cash as an investment. Cash is a bad investment over time.

But you always want to have enough so that nobody else can determine your future essentially.

The worst financial panic is behind us. The economic spill-out, which came to some extent from that financial panic, is still with us. It will end, I don't know whether it'll end tomorrow or next week or next month – or maybe a year.

But it won't go on forever and to sit around and try to pick the bottom – people were trying to do that last March and the bottom hadn't come in on unemployment, the bottom had come in business, but the bottom had come in stocks.

So don't pass up something that is attractive today because you're hoping you're going to find something way more attractive tomorrow.

Warren Buffett: form habits to make people attracted to you.

March 29, 2015

Transcript

PRANNOY ROY: So Ajit similar in lessons to you, does he advise you much? Or just write a letter to you once in awhile?

AJIT JAIN: No, he advises me a lot. I still think it's not enough. We have conversations typically every evening and almost all what I do, I have a chance to run it by him, and get the benefit of his advice and wisdom, and quite honestly that is the biggest perk of my job.

WARREN BUFFETT: But he doesn't need me. I love to talk to Ajit, so we do talk every day. I talk to Ajit more than any other manager we have by far. He doesn't need me, but he is in an interesting business, and so I like to talk about his business, and I like him personally. So, we talk about personal things as well.

PRANNOY ROY: But that's something about you which everybody says - you have a tremendous personal relationship with so many people in your organisation – your friends.

WARREN BUFFETT: Well, I've got the ultimate luxury. I get to associate with people I want to associate with. So, if I meet somebody who wants to sell me their business and they caused my stomach to churn for some reason. Yeah, I don't have to buy it.

I mean, you know and I can't be fired. I've got a friend who likes owning a hundred percent of his company because he likes to look in the mirror and say all my shareholders love me.

Well, I look in the mirror and say enough of my shareholders love me. So, I get to choose who I associate with – that's a terrific luxury in life and so when I find Ajit back in 1985, you know, I feel like I've discovered a goldmine or something, and he's somebody I'm attracted to personally.

We're good friends. That makes my life better, that makes Berkshire more valuable and it makes my life better on a personal level... and we've got dozens of managers, there's one right here with me on this trip.

Cathy Baron-Tamraz who runs Business Wire has three offices in India, and it is a joy to work with Cathy. I mean, my life is better because she is part of Berkshire. Berkshire's better because she's part of Berkshire also. But I get that, I have that option.

PRANNOY ROY: That's a lovely option to have.

WARREN BUFFETT: It's a fabulous option.

PRANNOY ROY: This young lady here in the front, second row, yes ma'am.

YOUNG LADY: I'm Shraddha Gupta from St. Stephens, I'm studying economics there. A long time ago, I saw this doc where you had given a talk at an MBA school, and you ran the students through an exercise where you asked them to choose a classmate in which they would invest 10% and another classmate on whom they would go 10% short, and you mention that Ben Graham did the exercise himself.

So, I was wondering if you ever did the exercise and if yes, then which habits did you choose to develop, and which habits did you choose to let go of?

Bill Gates and Warren Buffett

WARREN BUFFETT: Well, if you look around you at the people you admire, you know they have certain qualities. I mean, you've got friends, why do you like them? Generally, they have an upbeat attitude on life. Generally, they're generous people, they're humorous people. They're people who do more than their share.

They're people who are thinking about something nice they can do for you. And all of those qualities attract you and none of those are innate at birth. I mean, you can acquire those, and then there's other people that turn you off, and they have habits.

They take credit for things they didn't do. They don't show up on time, whatever it may be, they're a little dishonest about things, and, if you're looking at your life at a young age like you are, and you can choose what kind of a person you can be. Why not be the person you admire rather than the person you can't stand? It's so simple.

So just write down the qualities you like. Take your five best friends, why do you like them? And just write down those qualities, and you will find there is no quality there that you can't have yourself. And similarly with the five people you can't stand to be around, put those things down that turn you off about those people, and if they turn you off about them, why should you possess them? It's so simple.

It's not like something complicated that you think you should be learning with an advanced degree in school.

PRANNOY ROY: It's not as complicated as investing in the stock market.

WARREN BUFFETT: Haha, no. But it's enormously important to have people work with you in life. They're going to work with you in life, if they like you.

They may occasionally, if you're in the army or something, you may work for somebody that you don't like, but in large, you're going to get the best out of people if they feel good about you.

And it's just so easy, but you've got to develop the habits early because you can't say I'm going to suddenly a terribly attractive person when I'm 60.

It just doesn't work that way. So pick up the right habits now and I will guarantee you, if you actually just write down those qualities and think about it, you will find you can have every one of the attractive qualities, get rid of the ones that are negative and your life will be different.

PRANNOY ROY: That's really good and simple advice but it's quite organised. Are you an organised person? Like you write a list?

WARREN BUFFETT: Well, my boss Ben Graham, I had this hero, one of my heroes in school. And Ben Graham literally did that when he was a very young man and I read about it.

Then I talked to him about it subsequently. And the truth is everybody liked Ben Graham, and it wasn't because he was smart about investments. It was because he was a kind human being. You choose what kind of human being you are going to be. Then other people choose whether to associate with you or not. Or to be led by you.
One of the great leaders in American business is this fella called Tom Murphy, for many years ran Cab Cities.

Every time I saw Tom Murphy, I felt to myself, what can I do for him?

Because he had done so much for me, and hundreds of people. His employees felt that way, his directors felt that way, his friends felt that way. And we still feel that way, now that is wonderful way to go through life.

People love the guy, you know.

Further reading

Warren Buffett’s annual reports are a great place to learn more about investing. They’re all free and available online – so if you’re interested in finding out more about Buffett I think, they’re the best place to start. You can find them here.

I’ve also written about Warren Buffett and Bill Gates favourite business book here. If there is an interview with a famous investor that you’d like me to cover, please let me know.

Warren Buffett on how the average person can invest.